Square goes big: raises $200M at $3.25B valuation

Square, the mobile payment startup backed by Visa, Chase and Starbucks, has just raised $200 million, valuing the company at a reported $3.25 billion. The funding, first rumored over the summer, comes from Citi Ventures, Rizvi Traverse Management and Starbucks, which announced its $25 million investment as part of a big partnership.

The money will help Square continue to grow, especially as it prepares to go international this year. The company is now processing $8 billion on an annualized basis, up from $1 billion a year ago, and is planning on adding another 100 employees to its staff of more than 400 people, Square COO Keith Rabois told AllThingsD. The new funding brings Square’s total investment to date to $340 million, including a $100 million round last year. Rabois will be speaking about the future of Square at GigaOM’s Mobilize conference on Sept. 20-21.

Square, which was founded in 2009, has grown tremendously as a mobile payment acceptance tool for merchants, who are able to take credit card payments using a smartphone or tablet. The company has also been pushing hard on its own mobile payment service Pay with Square, which allows people to pay with a mobile app. Over the last year, a number of big players including PayPal, NCR and VeriFone have rolled out Square competitors, seeking to eat into Square’s growth. The new money should help Square fend off these attacks and position it to move up market as it appeals to larger merchants and retailers.

That’s going to be a big challenge for Square. It has a lot of momentum, winning over smaller business owners. But the company believes it can apply its service to all kinds of businesses. The Starbucks deal, in which Starbucks users will be able to pay using Pay with Square, gives a glimpse at how the company can extend to larger retailers. But it will now have to show it can win over other businesses, both here and abroad.